Supply Chain

1. Sourcing

   Choosing suppliers and deciding how many. Single sourcing is cheaper and more fragile; dual sourcing costs margin and buys optionality.

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2. Logistics

   Moving things from where they are to where they are needed, at an acceptable cost and time. The two are usually in direct conflict.

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3. Inventory

   How much is held, where, and why. Buffer stock is insurance with a visible premium and an invisible payout, which is why it is usually cut first.

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4. Resilience

   The capacity to keep operating when something in the chain fails. Built in advance or not at all, since it cannot be acquired during the disruption it was meant for.

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1. The Kraljic Matrix

   Peter Kraljic · 1983

   Also known as Purchasing portfolio matrix

   Sort what you buy by how much it matters and how risky it is to get, and buy each kind differently.

   Four categories: the routine, the leveraged, the bottleneck and the strategic. What it changed was the assumption that purchasing is one activity — a bottleneck item worth very little can stop a factory, and treating it like stationery because it is cheap is how that happens.

   Reach for it when

   When supplier relationships are being managed uniformly, or when a trivial component has just halted production.

   Where it stops

   It sorts categories, not individual relationships, and it says nothing about what the supplier thinks of you — who may have their own matrix with you in the routine box.

   Peter Kraljic, “Purchasing Must Become Supply Management”, Harvard Business Review, 1983.

2. The bullwhip effect

   Jay W. Forrester; named by Hau L. Lee and colleagues · 1961

   Small changes in end demand grow into large swings the further back up the chain you go.

   Each link reacts to the orders in front of it rather than to real demand, adds a margin of safety, and passes an amplified signal backwards. The important finding is that this happens with entirely rational behaviour at every step — nobody has to be foolish for the chain to end up wildly over- and under-stocked in turn.

   Reach for it when

   When stock swings between shortage and glut, and when deciding who in a chain gets to see actual demand.

   Where it stops

   Naming it does not damp it. The remedies — shared information, shorter lead times, less order batching — need agreement between parties who each benefit from their own buffer.

   Jay W. Forrester, Industrial Dynamics, MIT Press, 1961; Hau L. Lee, V. Padmanabhan & Seungjin Whang, “The Bullwhip Effect in Supply Chains”, Sloan Management Review, 1997.

3. The SCOR Model

   Supply Chain Council, now ASCM · 1996

   Also known as Supply Chain Operations Reference model

   A shared vocabulary and set of measures for the standard processes every supply chain performs.

   It names the chain’s activities — plan, source, make, deliver, return, enable — at increasing levels of detail and attaches standard metrics to each. Its worth is comparability: without a shared definition, two companies measuring the same thing are measuring different things, and neither knows it.

   Reach for it when

   When comparing performance against anyone outside the company, or when two organisations have to describe a shared chain to each other.

   Where it stops

   It standardises description, not design. A chain can score well on every standard measure and still be the wrong chain for the strategy.

   Supply Chain Operations Reference model, Supply Chain Council, from 1996; now maintained by ASCM.

These are other people’s models, named here so you can go to the source and use them properly. The Omnigoal is not affiliated with their authors and is not endorsed by them; nothing of theirs is reproduced here — no canvas, no diagram, no wording. Each is described in our own words, with the originator credited, because the framework is a place to put thinking, not a replacement for the people who did it. Model names and trademarks belong to their respective owners and are used here only to refer to the work itself.

Count the single points of failure before optimising anything. Efficiency work reliably removes the buffers that were absorbing variability nobody had measured.